There has been much talk about state deficits lately, much of it misleading. What makes the discussion confusing are the many “deficit” numbers out there. Understanding those numbers can help taxpayers cut through the rhetoric and get to the truth.
The first measure of “deficit” comes at the beginning of the budget process when the Department of Revenue (DOR) and Legislative Fiscal Bureau (LFB) provide initial estimates of revenues for the next biennium and the Department of Administration (DOA) releases agency request amounts. When agency requests are more than expected revenues, there is an imbalance—typically called a deficit—that has to be addressed when the budget is put together by the governor. For 2011-13, agencies requested about $3.6 billion more than was available. The budget approved this summer eliminated that imbalance, or “deficit,” just as the 2009-11 budget closed a more than $5 billion gap between agency requests and expected revenues.
The second “deficit” number that is often touted is the “structural deficit.” Although usually called a deficit, it too is really an imbalance and is also forward looking. In layman’s terms, the structural deficit measures the gap between current revenues and future commitments. For example, LFB estimated the structural imbalance to be $1.2 billion for the first year of the 2011-13 budget. Since 1997, these first-year imbalances have ranged from about $600 million to $1.4 billion. The 2011-13 budget eliminated this “deficit” so that, according to LFB, there will be a small “surplus” heading into the 2013-15 biennium.
The final “deficit” number comes from state’s Comprehensive Annual Financial Report (CAFR)—Wisconsin’s official financial statements. Here, state accountants apply generally accepted accounting principles (GAAP) to state finances. By contrast, lawmakers use cash accounting when balancing the budget. You can read about the difference in our newsletter. Under GAAP, the state’s general fund had a -$2.99 billion balance at the end of fiscal 2011. That was slightly worse than the -2.94 billion balance at the end of fiscal 2010. While the 2011-13 budget eliminated the first two “deficit” measures, it will do little to address the GAAP imbalance. Budget documents show an estimated -$3.02 billion balance at the end of fiscal 2013.